Determinants of Contract Participation and Profit Functions for Certified Rice Seed Production in Myanmar: A Heckman Two-stage Model Approach

Abstract

The private sector involvement is gradually rising in rice seed production through contract farming and contract farming is playing an increasingly important role in many developing countries. Now certified rice seeds are being produced by contract farming with local farmers and private seed companies in Myanmar. Certified rice seed production in Mandalay Region was chosen as the study area because most of seed production farms are located in Mandalay Region. Heckman two-stage model was developed by Heckman (1979) and it had been used in this study to examine the dependent and independent variables for the contract participation and profit of the certified rice seed production. Socioeconomic characteristics and institutional factors of certified rice seed producer farmers were examined. According to the contract participation regression estimates, the schooling year of the household head showed a significant and negative relationship with contract participation and non-farm employment was also found to have a significant and negative effect indicating that farmers who have non-farm employment were less likely to participate in contract farming. Similarly, the seed-producing area showed negative correlation that the small holder farmers are more participating in contract farming than large-scale farmers. Moreover, farmers with higher seed producing experience were more participating in contract farming. Membership in a seed grower association, and the number of meetings with the seed company were all positive and highly statistically significant factors affecting contract participation. The profit of certified rice seed producing were affected by the number of seed-producing training and the number of field extensions provided form the Department of Agriculture (DOA). Hired labor cost, material cost and machinery cost were negatively affected to the profit. In contrast, the rice seed price was found to have a strong positive and highly significant effect suggesting that higher seed prices encourage greater profits of the seed production.